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Belarusian President Says Devaluation Was IMF Demand

President Alyaksandr Lukashenka
MINSK (Reuters) -- Last week's sharp devaluation of the Belarusian currency, a shock to many in the ex-Soviet republic, was a condition of a $2.5 billion IMF loan, President Alyaksandr Lukashenka said on January 9.

The devaluation has sent people rushing to buy goods before prices go up and some say it could shake faith in the rule of Lukashenka, who had insulated the population from world market turbulence by keeping much of the economy in state hands.

In a measure of the scale of the world economic turmoil, even Belarus has felt the effects and has been forced to seek a $2.5 billion loan from the International Monetary Fund.

"There were two demands: not to raise salaries or pay in Belarusian roubles, because people will change them into dollars," Lukashenka said via his press service. "The second demand was that we devalue the [Belarusian] rouble by 20 percent."

Freeing up the currency system, cutting social spending to balance budgets and imposing wage controls are common conditions set by the IMF for its loans to help rebalance ailing economies.

On December 31 Minsk agreed to the IMF loan and on New Year's Day it devalued the rouble to 2,650/$ from 2,200/$.

Lukashenka said the devaluation was also a support measure for Belarusian industry: "Russia is our major trading partner and, with a strong Belarussian rouble, our exporters had begun to make large losses trading in its markets."

The average wage in Belarus, at $400 a month according to the latest data, is now worth $332 after the devaluation.

Lukashenka, widely known in his country as "Batka" or "Dad," said everything would be normal from now on: "There's no need to run to the bureau de change."

Belarusians have rushed to the shops to buy what they can in anticipation of steep price rises once the next set of imports hits the shelves.

"If somebody wants to invest their money in goods -- that's correct. But to buy three, five, 10 televisions or refrigerators in the belief this is a good investment is complete stupidity, because the prices of these goods will fall," Lukashenka said.

"You need to keep your money in the bank."